Other students who have been especially incisive on social topics are Mouna Andraos, Jake Barton, Michelle Chang, John Geraci, Elizabeth Goodman, Christina Goodness, Sam Howard-Spink, James Robinson, Matty Sallin, Nick Sears, Mike Sharon, and Shawn van Every. Alicia Cervini’s careful reading has improved both the ideas and their expression from the first draft.
My field has a tradition of thinking out loud. Chris Anderson, Andrew Blau, Stewart Brand, Lili Cheng, Esther Dyson, Hal Levin, Bob Metcalfe, Jerry Michalski, Richard O’Neill, Tim O’Reilly, Peter Schwartz, Andrew Stolli, and Kevin Werbach all provided both observations and public platforms for the development of this work. Articles written for Chris Anderson for Wired and Thomas Stewart for Harvard Business Review did likewise.
Long-running conversations with many colleagues have provided material and insights for this book. This list, of all, is both long and incomplete.

…

By 2008, there were 3.3 billion mobile phone subscribers, out of a global adult population of less than 5 billion. This increase in scale, both of the underlying social media and of the population that uses it, is still creating surprises because large systems behave differently from small ones.
One fitting name for the way more is different is “the network effect,” the name given to networks that become more valuable as people adopt them. Robert Metcalfe, the inventor of the Ethernet networking protocol, gave his name to a law that describes this increase in value. Metcalfe’s Law is usually stated this way: “The value of the network grows with the square of its users.” When you double the size of the network, you quadruple the number of potential connections. This is Birthday Paradox math, recast as a source of value instead of cost.
Being the only person in the world who can send e-mail isn’t a terribly exciting proposition, but once you can send e-mail, every new user means there’s someone new you can trade messages with.

…

Trow, Atlantic Monthly Press (1997).
CHAPTER 2: SHARING ANCHORS COMMUNITY
Page 25: Birthday Paradox Wikipedia contains a good general guide to the Birthday Paradox, at en.wikipedia.org/wiki/Birthday_paradox. (As always, Wikipedia also contains links at the bottom of the article to additional materials on the subject.) An alternate formulation of the same math is expressed as “Metcalfe’s law.” Robert Metcalfe, inventor of a core networking technology called Ethernet, proposed that “the value of a network rises with the square of its members,” which is to say that when you double the size of a network, its value quadruples, because so many new links become possible. Metcalfe’s law isn’t true in any literal sense, because not all links are created equal—being able to contact your friends matters more than being able to contact someone you’ve never heard of who lives on the other side of the world.

He thought he knew what the real problem was: Not that his work was “insufficiently theoretical,” but that he had spent all those years hanging around the MITcampus instead of carrying water for some Harvard professor who happened to be on his thesis committee. Bob Metcalfe had thumbed his nose at Harvard, and it was payback time. “My thesis advisor should never have let that happen,” he said later. “But I wasn’t playing ball with him, so he didn’t play ball with me.” In any case no amount of fulmination would solve his immediate dilemma. He had accepted a job from PARC with the understanding that he would arrive properly garlanded with a Harvard Ph.D. Apprehensively he called Taylor from home to deliver the bad news.
“He didn’t even hesitate,” Metcalfe recalled. “He said, ‘Just come on out and finish your thesis here.’ That felt very, very good.” Bob Metcalfe’s personality added a tart new ingredient to the CSLstew. He was a one-man deflation brigade, ever poised to puncture the bravado of his talented peers.

January: Journalist Don Hoefler, in a series of articles for the weekly newsletter Electronics News, popularizes the term “Silicon Valley.”
February: Design work begins on PARC’s cloned PDP-10 computer, known as MAXC.
June-August: Kay and a hand-picked team complete the first version of their revolutionary object-oriented programming language, Smalltalk, which will heavily influence such modern programming systems as C++ and Java.
November: Starkweather completes work on the world’s first laser computer printer.
June: Bob Metcalfe encounters a technical paper describing Hawaii’s ALOHAnet, several principles of which he will incorporate into Ethernet.
September: MAXC having been completed, Thacker and Lampson invite Kay to join their project to build a small personal computer. The machine will be known as the Alto.
November 22: Thacker begins design work on the Alto.
December 7: Rolling Stone publishes Stewart Brand’s article “Spacewar,” sparking months of controversy by its depiction of computer research at PARC.

• “Television won’t be able to hold on to any market it captures after the first six months. People will soon get tired of staring at a plywood box,” Darryl Zanuck, founder of Twentieth Century Pictures (1946).18
• “There is no reason anyone would want a computer in their home,” Ken Olsen, founder of Digital Equipment Corporation (1977).19
• “I predict the Internet … will soon go spectacularly supernova and in 1996 catastrophically collapse,” Robert Metcalfe, founder of 3Com and the Ethernet (1995).20
Since we don’t know which invention will take off, we can’t estimate which rare metal will either. Thirty years ago, dysprosium had little use. Now, in part because of its use in magnets, it is essential for our new high-tech lives. Gallium, because of its low melting point, could find itself in high demand in 3D printing, a type of home-based manufacturing.

pages: 386words: 91,913

The Elements of Power: Gadgets, Guns, and the Struggle for a Sustainable Future in the Rare Metal Age
by
David S. Abraham

• “Television won’t be able to hold on to any market it captures after the first six months. People will soon get tired of staring at a plywood box,” Darryl Zanuck, founder of Twentieth Century Pictures (1946).18
• “There is no reason anyone would want a computer in their home,” Ken Olsen, founder of Digital Equipment Corporation (1977).19
• “I predict the Internet … will soon go spectacularly supernova and in 1996 catastrophically collapse,” Robert Metcalfe, founder of 3Com and the Ethernet (1995).20
Since we don’t know which invention will take off, we can’t estimate which rare metal will either. Thirty years ago, dysprosium had little use. Now, in part because of its use in magnets, it is essential for our new high-tech lives. Gallium, because of its low melting point, could find itself in high demand in 3D printing, a type of home-based manufacturing.

The UCLA Network Measurement Center continued generating test traffic to probe the weaknesses of all the network algorithms. But there wasn’t enough natural traffic on the network to really push the limits of the routing and anticongestion schemes.
There were some interesting early uses. Programmers at SRI were using Utah’s PDP-10 compiler in preparation for installing their own PDP-10, and they generated the most actual traffic. Jon Postel at UCLA was using the network to run SRI’s oNLine System.
Bob Metcalfe, a Harvard graduate student working at MIT, and a friend, Danny Cohen, who taught at Harvard, did one of the more exciting early experiments over the network. Metcalfe and Cohen used Harvard’s PDP-10 to simulate an aircraft carrier landing and then displayed the image on a graphics terminal at MIT. The graphics were processed at MIT, and the results (the view of the carrier’s flight deck) were shipped back over the ARPA network to the PDP-1 at Harvard, which also displayed them.

…

Kids could write their own programs in the LOGO language that said, “go left, go right, go forward, back up, move sideways,” and when the program was run, the turtle would do that. At the moment, however, the turtle was jumping up and down, twitching and jerking crazily. Instead of sending Postel’s file to the printer, the system had accidentally sent it to the turtle port, and the robot dutifully offered its interpretation of what it took to be motion commands.
As an enthusiastic graduate student, Bob Metcalfe had undertaken the task of writing a booklet to accompany the demonstrations. It described nineteen scenarios for using the ARPANET, listed resources at various sites, and showed how to log on to a remote host, how to gain access to one of the applications, and how to control a program or engage in some kind of interactive communication over the network. There were several chess games, an interactive quiz about the geography of South America, a way of reading the Associated Press news wire over the network, and many other games, tools, and demonstrations.

…

Once Postel decided that creating a separate protocol was the right thing to do, he set about making sure it got done. With a clean separation of the protocols, it was now possible to build fast and relatively inexpensive gateways, which would in turn fuel the growth of internetworking. By 1978, TCP had officially become TCP/IP.
ETHERNET
In 1973, just when Cerf and Kahn had begun collaborating on the concept of internetworking, Bob Metcalfe at Xerox PARC was inventing the technological underpinnings for a new kind of network. Called a short-distance, or local-area, network, Metcalfe’s network would connect computers not in different cities but in different rooms.
Metcalfe had received his undergraduate degrees in electrical engineering and management from MIT and enrolled at Harvard for graduate school. But he hated Harvard immediately.

Somehow, Taylor told his people, you have to network these machines together; otherwise, you'll be tak- ing a giant step backward, graphics or no graphics. Fortunately, however, Thacker and his colleagues didn't really have to focus on communications. For something like six months now, PARC had had an ex- perienced networking hotshot hard at work on the problem-a relatively new re- cruit by the name of Bob Metcalfe.
In an odd sort of way, admits Bob Metcalfe, a lot of the credit for the network he developed at PARC has to go to the applied-mathematics department at Har- vard University: he hated it. In fact, he'd spent his entire graduate career there staying as far away as possible-which was why he'd actually done his Ph.D. re- search for money, working on the Arpanet as a full-time staffer for J. C. R. Lick- lider's group at Project MAC.

…

By the end of the 1990s, Windows would overwhelm- ingly dominate the operating-system market, to the point where the Justice De- partment's Antitrust Division would feel compelled to take an interest in Microsoft. On the communications front, meanwhile, the proliferation of Macs and PC clones was very good news for networking start-ups such as 3Com, which had al- ready begun to prosper by selling Ethernet products for VAXes and worksta- tions. Indeed, the personal-computer revolution was what transformed the Bob Metcalfe of 1979 into the Bob Metcalfe of today: the proud possessor of a farm in Maine, a town house suitable for an embassy in Boston's tony Back Bay neighborhood, a prestigious second career in technology journalism, and a per- sonal fortune that amounts to a noticeable fraction of Bill Gates's. "I tell people I didn't get rich inventing Ethernet," he says with a laugh. "I got rich selling it!" Just so-though in truth, the microcomputer market was something of a tough sell in those early days.

…

Given the nature of inter- active computing, in fact, even the fieriest activists among them could argue that they were co-opting the Pentagon, and not vice versa. They were striking a blow for intellectual freedom. They were liberating human potential. And not incidentally, they were liberating a few dollars that might otherwise be spent on B-52s. "That was the lie we told ourselves," recalls a wry Bob Metcalfe, then an undergraduate computer-science major at MIT: "Our money was bloody on only one side." Then, too, many of these kids were nothing if not escapist. The obsessive techno-weenies who haunted the terminal rooms of Project MAC and the other ARPA sites were children of the sixties, all right. But the worlds they were creat- ing for themselves had less in common with the angry antiwar movement out on the streets than with the psychedelic, peace-and-love communes of Haight- Ashbury.

Nick Moore wasn’t here, damn.
My eyes got stuck in the middle of the room. There was Bob
Metcalfe staring at the slide, looking at the line going up and up
Packet Racket
189
and up. He was shaking his head with a look of both amazement
and disbelief, and this was the guy that invented it.
After a dozen of those IMP nodes were up and running, it was
time to start giving demos to people who mattered. One of the
ARPANET researchers was in charge of giving a demonstration to
some bigwigs from AT&T. Keep in mind that the phone network
was engineered to fail for only two minutes every 40 years. That is
one of those six nine’s, or four to the right of the decimal point, or
99.9999% reliability. As the story goes, researcher Bob Metcalfe
was in the middle of demonstrating the packet network when, like
any good demo, it crashed.

…

I started chuckling because he kind of looked like
a cross between Soupy Sales and Eddie Munster. It was lunchtime
at George Gilder’s Telecosm conference, and we were waiting for
the featured speaker, Gary Winnick of Global Crossing, to explain
how he sends billions of packets per second under the Atlantic
Ocean. George Gilder has hosted his Telecosm conference for years.
Tech luminaries like Carver Mead, Bob Metcalfe and Paul Allen
were regulars.
“I don’t know what the ﬁrst packet was,” I confessed. My
tablemate turned out to be Leonard Kleinrock, a UCLA professor,
according to his name tag. It turned out that he had been at the
creation.
Since the 1978 introduction of the Apple II computer, to the 1981
announcement of the IBM PC, the world has been ﬂooded with
smaller, cheaper and faster computers. More than 100 million new
ones get sold every year.

…

This put smiles on the faces of those 10
AT&T execu-humps, and they merrily skipped back to headquarters singing the stillbirth of packet switching. Of course, they were
right for another 30 years, but packet switching would eventually
be trouble for circuit-switched phone networks. Metcalfe got back
at them.
With the success of its new packet network, ARPA became “D
for Defense” DARPA, to remind everyone it was your defense dollars at work, keeping communications alive in the event of a
nuclear war.
Bob Metcalfe moved from DARPA to the Xerox Palo Alto
Research Center. He was playing around with a bunch of new
Xerox Alto workstations, trying to devise a fast network both to
hook them together, and more importantly, to connect them to laser
printers that Xerox was hoping to sell in large numbers. This was
around 1976, and Xerox PARC was still a playground for dreamy
scientists. Conference rooms didn’t have tables and chairs—they
had beanbag chairs.

But over time, the
shrink and integrate learning curve kicks in, and the cost of packet
switching plummets and the benefits swamp the old way of doing
things. Finally, in 2001, the business of switching telephone calls died.
Worldcom and Global Crossing tried to revive the corpse with
accounting tricks to buy themselves time to move to packets, hence the
accounting scandals in 2002.
In the fall of that year, I sat at the same table with Bob Metcalfe
during a presentation on the future of networking. The talk was dull,
but as a slide demonstrating uses of 10 gigabit and soon 100 gigabit
Ethernet networks flashed on the screen, I noticed a funny look on Bob
Metcalfe’s face: He was half stunned, half amused that Ethernet is still
scaling from those 2.94 megabit per second beginnings.
150
HOW WE GOT HERE
Metcalfe is also known for another famous observation – that
the value of a network goes up by the square of the number of nodes
attached to it.

…

Since 14 other sites were a
lot to keep in touch with, in 1971 Ray Tomlinson at BBN wrote a
message reader and writer so BBN could send and receive notes on the
system. He used @, the “at” sign, to denote the destination. Email was
born.
One of the ARPANET researchers was in charge of giving a
demonstration to some bigwigs from AT&T. Keep in mind that the
phone network was engineered to fail for only 2 minutes every 40
years. That is one of those 5 nine’s to the right of the decimal point or
99.99999% reliability. As the story goes, Bob Metcalfe was in the
middle of demonstrating the packet network when, like any good
SOFTWARE AND NETWORKS
147
demo, it crashed. This put smiles on the face of those 10 AT&T execuhumps, and they merrily skipped back to HQ singing the stillbirth of
packet switching. Of course, they were right for another 30 years, but
packet switching would eventually be trouble for circuit-switched
phone networks.
With the success of its network, ARPA became DARPA, to
remind everyone it was “Your Defense Dollars At Work.”

The topological charm of these explosively growing clusters was first teased apart by the electrical engineer Bob Metcalfe in the 1970s. Metcalfe was hunting for a better way to send data—say, grocery lists to his wife—through Menlo Park, and he perfected a connection protocol called Ethernet, which soon became a standard for linking machines. What Metcalfe noticed as more and more users piled into the gateland of Stanford’s Ethernet-connected machines was that the reach of the system was growing exponentially. A system with one phone, for example, is really not very useful. Whom would you call? A system with two phones means that there is one possible connection—we can call each other. But when you increase the number of phones by a factor of two—from five to ten, say—the number of possible connections more than doubles, from twenty-five to ninety. The difference between Bob Metcalfe and his wife sharing grocery lists and a connected, national network of husbands and wives is immense—an insight that led Bob Metcalfe and his wife to start a networking company that made them billionaires.

…

The difference between Bob Metcalfe and his wife sharing grocery lists and a connected, national network of husbands and wives is immense—an insight that led Bob Metcalfe and his wife to start a networking company that made them billionaires.
Metcalfe’s Law has another angle, and it’s here where some of the unique Macht of network gates is revealed: It’s not merely that the power of a network grows exponentially with each additional user; it’s that the cost of being cut out grows every bit as fast. Maybe even faster. If I shut you out of Google today, it’s painful. But tomorrow—after a day of new information and websites and services coming online—it will be even more costly. The network scientists Rahul Tongia and Ernest Wilson have called this “the flip side of Metcalfe’s Law.” To be excluded from a database of cancer genetics when it has a million members, for instance, is probably not such a painful problem; to be locked out of the chance to compare your genes with those of a billion others might be fatal.

There were “Moore’s Laws” of doubling capacity in digital storage, in communications bandwidth, and in the ubiquity of microprocessors in everything from dolls and doorknobs to hearing aids. New machines became obsolete every three years. The proliferation of personal computers and the digitizing of communications via the Internet set off what came to be called Metcalfe’s Law, named after Xerox engineer Bob Metcalfe. It states that the power of a network grows as the square of the number of users (people or devices) on the net. Hence the explosion of the World Wide Web in the mid 1990s, when the Net’s total content was doubling every one hundred days.
Related technologies such as biotech also took off. By 1997 Monsanto Corporation claimed that a computer-accelerated “Monsanto’s Law” was operating at a similar pace: “The ability to identify and use genetic information is doubling every twelve to twenty-four months.

…

This exponential growth in biological knowledge is transforming agriculture, nutrition and health care in the emerging life sciences industry.” Monsanto chose not to mention human germline engineering—that is, designing disease-resistant, higher-yield people.
Velocity itself became the dominating characteristic of the world’s quicksilver economy. “We are moving from a world in which the big eat the small,” remarked Klaus Schwab, head of the World Economic Forum, “to a world in which the fast eat the slow.”
FIGURE 3.2 Bob Metcalfe’s original diagram shows how the value of a net increases as the square of the number of nodes (or people) on the net. It was drawn in 1973 at Xerox PARC (a corporate research center in California) while he was working on a local-area network system called Ethernet. The diagram shows that the costs of a network system are linear, whereas the growing value of the net is exponential, and that therefore the value will surpass the costs at the “critical mass crossover” and thereafter ascend to glory.

It’d probably take a lot—re-creating your whole profile, uploading all of those pictures, and laboriously entering your friends’ names would be extremely tedious. You’re pretty locked in. Likewise, Gmail, Gchat, Google Voice, Google Docs, and a host of other products are part of an orchestrated campaign for Google lock-in. The fight between Google and Facebook hinges on which can achieve lock-in for the most users.
The dynamics of lock-in are described by Metcalfe’s law, a principle coined by Bob Metcalfe, the inventor of the Ethernet protocol that wires together computers. The law says that the usefulness of a network increases at an accelerating rate as you add each new person to it. It’s not much use to be the only person you know with a fax machine, but if everyone you work with uses one, it’s a huge disadvantage not to be in the loop. Lock-in is the dark side of Metcalfe’s law: Facebook is useful in large part because everyone’s on it.

John Seely Brown, who was to become director of PARC, told me that two principles were at the center of the PARC philosophy. To begin with, Bob Taylor had brought the core directive of ARPANET with him to PARC. As Brown notes, “Decentralization was fundamental to ARPANET in the sense that a nuclear strike on a single city could not bring down the entire network.” Everything done at PARC, from the Alto to Bob Metcalf’s Ethernet architecture, was geared to making a decentralized network of personal computers function efficiently. This was new. The second core principle flowed from Alan Kay’s Dynabook. As Brown says, “The Dynabook and then the Alto were inspirations meant to empower the artistic individual.” When Brown first started working with Kay, he was playing music on the Alto and working with Stanford’s Center for Computer Research in Music and Acoustics.

…

Larger audiences improve Google’s data and make its products more accurate—as well as ever more impossible to avoid. As European competition commissioner Margrethe Vestager acknowledged last week, we live in the Google age.” So the techno-determinist philosophy has even reached into the brain of Google’s most determined regulatory opponent. This theory of self-reinforcing dominance has often been called the network effect, or Metcalfe’s law, after PARC researcher Bob Metcalfe’s formula that the value of a network is proportional to the square of the number of users. As more people use Google’s search engine, the company becomes exponentially more valuable. Could it be that Google is now what economists call a natural monopoly—a firm, such as a utility, that can supply an entire market’s demand for a service at a price lower than two firms could? In general, utilities are regulated by the government to protect consumers.

The concept was similar to the IEEE-488 connector of the PET but less expensive. The serial port originated with the TOI project. “It pretty much had the PET expansion bus on the back but we knew we couldn’t put the IEEE-488 on it,” says Seiler.
Chuck Peddle hired a former Xerox PARC engineer named Robert Metcalfe to help his engineers figure out the port. “He organized the meetings at Moorpark with Metcalfe because we were trying to design an expansion bus,” says Seiler. “We knew we couldn’t put the expensive HP IEEE bus in it so we tried to come up with something cheaper.”
“That summer in San Jose, Robert Metcalfe was a consultant who worked for Commodore before he founded 3Com,” says Feagans. “He was hired as a consultant to look at networking.”
Metcalfe pitched an idea he was currently working on.
“Metcalfe came over and explained the whole Ethernet thing,” says Seiler, referring to the technology for local area networks.

…

He began to enjoy rewards reserved for inner family members, including flying on the corporate jet in November 1980. “Jack flew me and my wife to Las Vegas for Comdex, and also our honeymoon, on the loaner PET Jet after the belly landing in Iowa,” says Feagans. “That was my first meeting with Jim Finke.”
At the newly reopened Moorpark offices, where the disk drive designers now resided, Feagans continued working on the concepts introduced to him by Robert Metcalfe, including networking and graphical user interfaces. The others began work on a data storage device using VCR tape.
Robert Russell, the young engineer hired in 1979, entered Tramiel’s inner family after his heroic efforts making the VIC-20 a reality. Russell worked out of an office at 3330 Scott Boulevard, in the same building as Tramiel. This meant Tramiel often dropped in on his engineers to monitor the progress of his projects.

…

It was probably wise to drop backward compatibility, given the limitations of the VIC-20. Unfortunately, it seemed to set the pattern for computer design in later years.
* * *
John Feagans continued working at the Moorpark R&D office after the C64 debut at CES. “I developed the music player for the launch of the C64 there and stayed to develop the Commodore network for the C64 and PET,” he says.
Inspired by Robert Metcalfe’s visit in 1980, Feagans created a computer network. His network required a master computer, which served up to 10 slaves. “I created a plug-in for the expansion port on the PET and also the C64 which brought out the serial port from the 6522 to an RS-422 interface,” says Feagans. “The ‘teacher’s PET’ was the master and the C64s were the slaves. I also networked a printer in the configuration.”

Demand economies of scale are the fundamental source of positive network effects, and thus the chief drivers of economic value in today’s world. This is not to say that supply economies of scale no longer matter; of course they do. But demand economies of scale, in the form of network effects, have become the most important differentiating factor.
Metcalfe’s law is a useful way of encapsulating how network effects create value for those who participate in a network as well as for those who own or manage the network. Robert Metcalfe, co-inventor of Ethernet and founder of 3Com, pointed out that the value of a telephone network grows nonlinearly as the number of subscribers to the network increases, making more connections among subscribers possible.
When there’s only one node in a network, no connections are possible. An MIT professor we know likes to joke that the prize for “greatest salesperson in history” should go to whoever sold the first telephone.

…

The accuracy of the search algorithm and the intuitiveness of the navigation tools offered to users as they seek other users with whom they can engage in value-creating interactions. Matching quality is critical to delivering value and stimulating the long-term growth and success of a platform. It is achieved through excellence in product or service curation.
Metcalfe’s law. A principle formulated by Robert Metcalfe which states that the value of a network grows nonlinearly as the number of users of the network increases, making more connections among users possible (a type of growth also known as convex growth). Specifically, Metcalfe’s law posits that the value of a network with n connected users is proportional to the square of the number of users (n2).
Multihoming. The phenomenon of users engaging in similar types of interaction on more than one platform.

The first step in this direction was the creation of a communication protocol that could be used by all kinds of networks, a seemingly impossible task in the early 1970s. In the summer of 1973, Vinton Cerf and Robert Kahn, computer scientists doing research at ARPA, designed the basic architecture of the Internet, building on work toward a communication protocol conducted by Kahn at his research firm, BBN. They called a meeting at Stanford, attended by researchers from ARPA and various universities and research centers, including PARC/Xerox, where Robert Metcalfe was working on packet-communication technology that would lead to the creation of local area networks (LANs). Technological cooperation also included various groups in Europe, particularly the French researchers associated with the Cyclades program. Working on the basis of this Stanford seminar, Cerf, Metcalfe, and Gerard Lelann (from Cyclades) specified a transmission control protocol that would accommodate the requests of different researchers, and of different existing networks.

…

Behind the development of the Internet there was the scientific, institutional, and personal networks cutting across the Defense Department, National Science Foundation, major research universities (particularly MIT, UCLA, Stanford, University of Southern California, Harvard, University of California at Santa Barbara, and University of California at Berkeley), and specialized technological think-tanks, such as MIT’s Lincoln Laboratory, SRI (formerly Stanford Research Institute), Palo Alto Research Corporation (funded by Xerox), ATT’s Bell Laboratories, Rand Corporation, and BBN (Bolt, Beranek & Newman). Key technological players in the 1960s–1970s were, among others, J. C. R. Licklider, Paul Baran, Douglas Engelbart (the inventor of the mouse), Robert Taylor, Ivan Sutherland, Lawrence Roberts, Alex McKenzie, Robert Kahn, Alan Kay, Robert Thomas, Robert Metcalfe, and a brilliant computer science theoretician Leonard Kleinrock, and his cohort of outstanding graduate students at UCLA, who would become some of the key minds behind the design and development of the Internet: Vinton Cerf, Stephen Crocker, Jon Postel, among others. Many of these computer scientists moved back and forth between these various institutions, creating a networked milieu of innovation whose dynamics and goals became largely autonomous from the specific purposes of military strategy or supercomputing linkups.

…

Moreover, when networks diffuse, their growth becomes exponential, as the benefits of being in the network grow exponentially, because of the greater number of connections, and the cost grows in a linear pattern. Besides, the penalty for being outside the network increases with the network’s growth because of the declining number of opportunities in reaching other elements outside the network. The creator of local area networks technology, Robert Metcalfe, proposed in 1973 a simple mathematical formula showing how the value of a network increases as the square of the number of nodes in the net. The formula is V = n(n – 1) where n is the number of nodes in the network.
Fourthly, related to networking but a clearly distinct feature, the information technology paradigm is based on flexibility. Not only processes are reversible, but organizations and institutions can be modified, and even fundamentally altered, by rearranging their components.

He has looked at flowers as well as a myriad of other industries in various books, including The Competitive Advantage of Nations, Competitive Advantage, and Competitive Strategy.
7. A lot of people have written on this phenomenon of a new economy; one of my favorites is Wired editor Kevin Kelly. Many of the ideas in this chapter come from his book New Rules for the New Economy (New York: Viking, 1998). Peter F. Drucker has also been detailing these changes for decades, starting with The End of the Economic Man (1939). See also his Post-Capitalist Society (1993).
8. Robert Metcalf, founder of 3Com, argues the value of a network is proportional to the square of the number of people in it.
9. Attempting to regulate these decentralized networks is certain to give bureaucrats ulcers— or worse. See, for example, Peter Maas, “Silicorn Valley,” Wired, September 1997: 131–38.
10. You can read about SETI in Howard Rheingold’s “You Got the Power,” Wired, August 2000: 176. Or go directly to www.seti.org/.
11.

Smaller and cheaper means more people can use more power in more ways. And people will inevitably find those ways.
How far is this more-powerful-cheaper-smaller trend going? To the vanishing point, it seems. Some believe that will happen in about ten years. We are among those who disagree because of the important emergent trend, nanotechnology, which envisions microprocessors being reduced to a single cell.
Metcalfe’s Law. Ethernet inventor Robert Metcalfe set forth the theory that the value of the telecommunications network is proportional to the square of the number of connected system nodes. He made his observations back when networks consisted of desktop computers, printers, fax machines and phones. But the law holds true today as billions of nodes are connected via Wifi and are growing rapidly toward the trillions. About 2.7 billion people are now nodes on the global network, and while it sounds strange, that connectedness empowers each of us.

And as the value of each phone increases, the more phones tend to become available to contact on the network, until there are so many other connections that the value of an additional connection is negligible. Network effects were first developed as a concept by the President of Bell Telephones in making his case for a monopoly in 1908, but the ideas were developed and refined in the 1980s and 1990s. Robert Metcalfe, one of the co-inventors of the Ethernet, was the progenitor of Metcalfe’s Law – that the value of a communications network varied with the square of the number of connections in the network. This idea was vigorously promoted by the economic guru George Gilder2 during the 1990s.
Where there are network effects, investment typically doesn’t take place until there is a critical mass of potential users.

It took a long time to build 3G networks, ensure their stability, and create an ecosystem of applications, but once Apple introduced the first iPhone in 2007 and Android followed shortly after, smartphones took over the market within three years.
We believe something very similar is about to happen in the M2M space. A big part of technology adoption is awareness. As Peggy Smedley says:
It’s all of these great minds that helped us understand what the technology can do for us, people like Robert Metcalfe or Steve Jobs and other great visionaries. They helped us really understand what the technologies can do, what the data behind the technologies can do. We have to look back before we can look forward.
We will talk more about the M2M technology ecosystem and its challenges in chapter 2; for now, let’s look at the history of M2M or the Internet of Things.
“Something is happening. Things are starting to talk to other things.

Jacobs
was a champion of hybridity, but understood that the secret
was to maintain the right balance of the elements and system.
Jane Jacobs is inspirational in terms of reminding us that deep
systemic analysis can be linked to action.7
Metcalfe’s Corollary
These infrastructure battles become more and more important because as complex systems evolve over time, what gets
constructed now, no matter how ad hoc, tends to be grandfathered in as time goes by. Bob Metcalfe—coinventor of the
Ethernet technology, founder of industrial giant 3COM, and
a pioneer in wiring people together—put forth one of the
most succinct analyses of networks ever offered: the value of
86
WEB n.0
a network is proportional to the square of the number of users
of the system (n2). Networks become more powerful and valuable as more users join them. One fax machine is useless, but
two fax machines create a secured connection, and the more
fax machines that are introduced into the network, the greater
the value to each individual sender and receiver—a geometric
rather than arithmetic increase with each new user.

Most bubbles end when no new money can be found to keep
blowing hot air. Whatever the revenue numbers or margin
numbers or earnings forecasts companies reported, their
stocks went down. The ducks were quacking in the opposite
direction. Momos started dumping. Until the fall, it wasn’t
213
Wall Street Meat
obvious that it was all over and many investors kept looking for
signs that things might turn back up, or that there might be a
bottom in these stocks.
Bob Metcalfe, the inventor of Ethernet networking and a
networking industry legend, ran a conference called Vortex,
and he asked me to be on a ﬁnancial panel that he was moderating. In May 2000, I caught a ﬂight to John Wayne Airport in
Southern California and then cabbed it to the Ritz Carlton at
Laguna Niguel. I had been there a million times for various
investment banking conferences, and it is not hard to be convinced to return.

For example, when users can simultaneously be on two or more platforms (multihoming), a single platform need not prevail—so while SitterCity may have reached a tipping point, the matchmaking between parents and babysitters hasn’t tipped toward any one platform.
43.This statement is a corollary of the so-called Metcalfe’s Law, which postulates that the value of a network is proportional to the square of the number of users of the network. We shouldn’t take this formula literally, and Bob Metcalfe himself has said that his point was to show a crossover point of cost and value, the critical mass of users before which a network doesn’t pay, rather than to tout the wondrous value of a large network. Regardless of the exact relationship, the basic idea that the value of a network grows at a faster rate than its size is well accepted. And if it is true, then the larger the network, the more attractive it becomes to new users.

He feels like Vice Admiral James Stockdale, ‘the American
prisoner in Vietnam who endured by his grim optimism for the long term –
I am absolutely certain that my work will be proven right eventually, and
empower the world at last’ (Nelson 2010c, 339).
Although Nelson seems to figure in every major history of computing and
multimedia (for example Segaller 1998; Wardrip-Fruin and Montfort 2003;
Ceruzzi 1998; Rheingold 2000; Abbate 1999; Shurkin 1996 and Bardini 2000)
as the man who dreamed up hypertext, he is not a known quantity outside of
the digerati. The people he appears beside in such histories – Doug Engelbart,
Bob Metcalfe, Tim Berners-Lee – have attained worldwide recognition (and
in the case of Metcalfe, wealth) and have directly influenced the course of
computing with their systems. Nelson’s influence on computing history is
undeniable, but harder to touch; all we have of Xanadu is a tantalizing design,
its ideals and its ideas.
You know, [Nelson] gets his name in the newspapers, but there isn’t a company
that has him as a serious consultant.

The nerd community’s desire to see the Internet as a free and open space stems in part from the overbearing behavior of a single institution: AT&T. For years, AT&T’s communication monopoly stymied the creativity of computer scientists and innovators, reaffirming in their minds the great distrust of large institutions that had taken root during the late 1960s. The man widely credited with inventing Ethernet and modern computer networking, Robert Metcalf, described it like this in Vanity Fair:
Imagine a bearded grad student being handed a dozen AT&T executives, all in pin-striped suits and quite a bit older and cooler. And I’m giving them a tour. And when I say a tour, they’re standing behind me while I’m typing on one of these terminals. … And I turned around to look at these ten, twelve AT&T suits, and they were all laughing. And it was in that moment that AT&T became my bête noire, because I realized in that moment that these sons of bitches were rooting against me … To this day, I still cringe at the mention of AT&T.

The IPO realized a payout of $765 million for Kleiner Perkins, which was more than double the value of the entire fund from which the original investment came.18 Clark’s investment of $3 million came to be worth $633 million—which explains why the incorrigibly self-aggrandizing entrepreneur put the identifying number 633MN on the tail of an executive jet he bought with some of his proceeds from the IPO.19 And the just turned twenty-four-year-old Marc Andreessen, who two years earlier had been making $6.85 an hour as a NCSA programmer, was suddenly worth $58 million, thus becoming the first in a long line of boy tycoons minted by the Internet.20
“What happened to Netscape Communications was without parallel,” notes David Kaplan, “and came to define modern Silicon Valley.”21 Netscape’s success drove the first great commercial expansion of the Internet. The number of Internet users grew from 16 million in 1995 to 361 million in 2000. This growth confirmed Metcalfe’s law—Ethernet inventor Bob Metcalfe’s eponymous rule that each new person who joins a network increases the power of that network exponentially. It triggered the dot-com boom, a half decade of irrational exuberance that created Amazon, Yahoo, eBay, and thousands of failed Internet startups, including my own, an online music website backed by Intel and SAP called AudioCafe. And it crowned Marc Andreessen, who was featured sitting shoeless on the cover of Time magazine in February 1996, as the young disruptive hero of the Internet revolution.

And in the late 1970s, the personal computer, the Ethernet and local networks, and word-processing software were all under development in service of that faith.
Yet even within PARC, none of these tools, startlingly innovative though each was, was quite the "killer" it was expected to be. That came with another PARC invention, one that transformed all these inventions into the indispensable office tools we know them to be today. Bob Metcalfe, one of the Ethernet's designers, got a clear sighting of the critical addition early on.
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Metcalfe would regularly take down the Ethernet links connecting researchers' workstations to one another so that he could work on the system. The traffic along the network was so light that no one bothered about the irregular downtime. Until one particular day. On this occasion, Metcalfe took the network down, and doors opened all along the corridor.

The ‘network effect’ was first theorized by Bell Telephone boss Theodore Vail 100 years ago. Vail realized that networks create something extra, for free. In addition to utility for the user of a telephone and revenue for the owner, he noticed a third thing: the more people join the network, the more useful it becomes to everybody.
The problem comes when you try to measure and capture that third thing. Robert Metcalfe, the inventor of the Ethernet switch, claimed in 1980 that a network’s value is ‘the number of users squared’. So while the cost of building a network rises in a straight line, its value rises in an exponential curve.38 By implication the art of doing business in a knowledge economy is to capture everything between the straight line and the rising curve.
But how do we measure value? In terms of money saved, revenue earned or profits accrued?

Now telephones are so ubiquitous that many of us carry a mobile one at all times.
Similarly, the advantage of participating in a payments service like PayPal increases as the number of other users goes up. If only a handful of people in the world accept money through PayPal, there is little benefit to taking the time to create an account. But if PayPal can be used to pay millions of people, the account is much more valuable. Robert Metcalfe, the inventor of Ethernet and founder of 3Com, coined Metcalfe’s Law as a way of understanding the power of networks. He claimed that the value of a network equals the square of its users, implying that a network with twice as many users as a competitor is four times as valuable.4
Given Peter’s firm belief in the importance of quickly scaling up our network, it didn’t surprise anyone that the calmness he displayed at the disappointing Scotty event was absent following the dotBank and X.com launches.

His plan was simple: buy up and merge all the struggling telegraph companies he could find. “This Western Union seems to me very like collecting all the paupers in the State and arranging them into a union so as to make rich men of them,” quipped a man of finance.
Of course, Western Union eventually succeeded for a variety of reasons, the most interesting of which is a nineteenth-century version of Metcalfe’s Law. Named for Robert Metcalfe, an engineer at Xerox PARC and coinventor of Ethernet, the law simply states that a network increases in value as more users (or communicating devices) are added to it. Stated another way, one electromagnetic telegraph was useless, two marginally better, and six better still. Specifically, a network’s value is proportional to the square of the number of devices or users.
Western Union would eventually link thousands of telegraph keys as a web of disparate lines were joined into a seamless and seemingly endless network.

The propulsion behind the “T” part is described by two laws: Gilder’s Law and Metcalfe’s Law. George Gilder observed that bandwidth grows three times more rapidly than computer power—doubling every six months. This allows transmission advances to help relax computing and storage constraints. Advances in data transmission, processing, and storage amplify each other. This is the economic basis of “the cloud” and its various uses.
Robert Metcalfe asserted that the usefulness of a network rises with the square of the number of users. When the number of network users is, say, 100,000, the number of possible new connections created by adding one more user is 100,000. When there are 200,000 users, adding one more creates 200,000 new connections. In other words, the incremental number of new connections does not rise in a straight line. The size of each increment grows with each new increment, so growth feeds on growth.

In social network analysis, this network structure is called a “scale free network.” Such a network is present if the nodes’ degree frequency distributes according to the power distribution.
14. Metcalfe’s law is a way to observe the increased benefits obtained as more people engage in the network. See Gilder, Telecosm. Reed’s law also looks at the exponential benefits to social networks. David Reed argues that Robert Metcalfe does not fully capture the extent to which additional members of a social network produce exponential connections to members (Reed, “The Law of the Pack”).
15. Social network analysts more formally call this the difference between an individual’s positions in a network and cause for his or her participation in some network and position in that network.
16. In pure numbers, A-listers have an average of 3 connections to each other (remember we’re just looking at connections among the top twenty, not the entire Getty network), while B-listers have 0.65 and the bottom rung have just 0.5 connections—that’s less than 1 full connection to at least one other person for the middle and bottom twenty actors.
17.

Reinforcing the bullish point of view was the fact that even the slow-growing Baby Bells were reporting 30 percent growth in their data services divisions, far beyond the 4–6 percent growth rates of more traditional Bell product lines. O’Dell’s and Sidgmore’s numbers would go on to become those “statistics” that everyone cited as gospel without knowing where they came from or whether they were actually true.
In May of 1998, I attended the grandly named Vortex Conference, a dot-com and technology get-together organized by Bob Metcalfe, the scientist from Xerox’s famous Palo Alto Research Center who invented Ethernet, today’s standard for rapid computer networking, and later founded 3Com. It took place at the Ritz-Carlton in Laguna Niguel, California, a gorgeous resort south of Los Angeles overlooking the ocean. But no one there cared much about the surf. The conference was chock-a-block with new companies trying to get funded, existing companies touting their technology, and, of course, bankers, analysts, and investors.

—John von Neumann, 1949
“There’s no reason for individuals to have a computer in their home.”
—Ken Olson, 1977
“640,000 bytes of memory ought to be enough for anybody.”
—Bill Gates, 1981
“Long before the year 2000, the entire antiquated structure of college degrees, majors and credits will be a shambles.”
—Alvin Toffler
“The Internet will catastrophically collapse in 1996.”
—Robert Metcalfe (inventor of Ethernet), who, in 1997, ate his words (literally) in front of an audience
Now I get to toot my own horn, and can share with you those predictions of mine that worked out particularly well. But in looking back at the many predictions I’ve made over the past twenty years, I will say that I haven’t found any that I find particularly embarrassing (except, maybe, for a few early business plans).

Start with this kind of stupidity, mix in enough greed, hubris, leverage,
and lack of adult supervision, and you get the headlines of the past year,
discussed in depth in Chapter 12.
Notes
1. Sergio Focardi, Peter Kolm, and Frank Fabozzi, “New Kids on the Block,” Journal of
Portfolio Management 30, no. 4 (Fall 2004): 42–53. The first article in the issue, by Andy
Lo, “The Adaptive Market Hypothesis,” is an excellent in-depth discussion of the
modern view of market efficiency.
2. Robert Metcalfe is the inventor of Ethernet (the ubiquitous wiring of the Internet),
and the founder of 3Com. His law was demonstrated first with telephones and fax
machines.
3. Okay, let’s belabor them a little for Generations X and Y and the Millennials, who
may have missed these back when they were everywhere, but may also pick up this
book. Gordon Moore, a founder of Intel, was fond of comparing the progress in
computer technology to progress in automobiles.

Picturephone calls required such tremendous (and costly) bandwidth that long-distance service was out of the question. For all these reasons, the technology couldn’t attract enough users to attract even more users. “To start up a service, you have to think about: I have one, you don’t have one—so I can’t talk to you,” Irwin Dorros says. “So I can only talk to you if you have one. So how do you get a critical mass of people that have them?” Many years later, a computer engineer named Robert Metcalfe would surmise that the value of a networked device increases dramatically as the number of people using the network grows. The larger the network, in other words, the higher the value of a device on that network to each user.36 This formulation—sometimes known as Metcalfe’s law—can help explain the immense appeal of the telephone system and Internet. However, the smaller the network, the lower the value of a device to each user.

Cerf is vice president and chief Internet evangelist at Google Inc. These quotes and opinions were obtained in an interview with the author in June 2008.
5. To read about AT&T at the time of the Internet’s inception, see Christopher H. Sterling, Phyllis Bernt, and Martin B. H. Weiss, Shaping American Telecommunications: A History of Technology, Policy, and Economics (New York: Routledge, 2006). To read how Vint Cerf, Robert Kahn, and Robert Metcalf interacted with AT&T, see their individual entries in Laura Lambert et al., The Internet: A Historical Encyclopedia, vol. 2 (New York: MTM Publishing, 2005).
6. “A Protocol for Packet Network Intercommunication” in Jeremy M. Norman, ed., From Gutenberg to the Internet: A Sourcebook on the History of Information Technology (Novato, CA: historyofscience.com, 2005) 871–90.
7. As quoted in Alfred L.

Low-Counter: Typically a desk station within a branch where the relationship manager can sit with customers and potential clients and advise them on available products and services.
Lo-Fi Prototype: A simple method of prototyping products, interfaces or applications and testing with target customers or users.
LIBOR: London Interbank Offered Rate
LinkedIn: An online social network for business professionals.
Metcalfe’s Law: Attributed to Robert Metcalfe, this law states that the value of a telecommunications network is proportional to the square of the number of connected users of the system (n2).
MFI: Microfinance Institution—an alternate form of bank found in developing countries which provides microcredit lending.
MIRC: Magnetic Ink Character Recognition
Mobile Portal: A website designed specifically for mobile phone interfaces and mini-browsers.

Genius defies expectations
The third point is to recognize that our expectations are not a reliable standard against which to measure feats of genius. We’re bad at guessing where present breakthroughs will take us:
I predict the Internet . . . will soon go spectacularly supernova and in 1996 catastrophically collapse . . . The Internet’s naïve flat-rate business model is incapable of financing the new capacity it would need to serve continued growth, if there were any, but there won’t be, so no problem.
—Robert Metcalfe, co-inventor of Ethernet and founder of 3Com, in 199547
We’re even worse at guessing what future breakthroughs will be. “Where are the flying cars?” is the perfect refrain to illustrate how our thinking gets trapped inside present paradigms. In the 1950s and 1960s, suddenly everyone drove cars and rode in airplanes. The most disruptive “next big thing” we could imagine was for our cars to fly, too.

My view is that it is hard to imagine infinite knowledge, given apparently finite resources of matter and energy, and the trends to date match a double exponential process. The additional term (to W) appears to be of the form W Î log(W). This term describes a network effect. If we have a network such as the Internet, its effect or value can reasonably be shown to be proportional to n Î log(n) where n is the number of nodes. Each node (each user) benefits, so this accounts for the n multiplier. The value to each user (to each node) = log(n). Bob Metcalfe (inventor of Ethernet) has postulated the value of a network of n nodes = c În2, but this is overstated. If the Internet doubles in size, its value to me does increase but it does not double. It can be shown that a reasonable estimate is that a network's value to each user is proportional to the log of the size of the network. Thus, its overall value is proportional to n Î log(n).
If the growth rate instead includes a logarithmic network effect, we get an equation for the rate of change that is given by:
(14)
The solution to this is a double exponential, which we have seen before in the data:
(15)
Notes
Prologue: The Power of Ideas
1.

By the fall of 1977, in my office there, I had a personal computer with a
bitmap display—oriented like a sheet of paper, not like a television set for the
obvious Xerox reasons. I had a software program running on it that was as good
as Microsoft Word—in fact it was developed by the fellow who left PARC and
went to Microsoft and built the Office product line for them, Charles Simonyi.
I had a great mail system on it that could mail to anybody in the ARPANET
community, as well as within Xerox. It was on the precursor of the 3Com
Ethernet technology, developed by Bob Metcalfe, who later left PARC and
started 3Com. The network connected the personal computers to laser printers.
We had a 60-page-a-minute black-and-white laser printer, a 10-page-a-minute
color printer. We had a file server where you could store files and share them
for projects. All of these computers were connected in both an internal and
external network throughout Xerox Corporation and into the ARPANET, which
was the precursor of the Internet.

Helliwell, Well-Being for Public Policy (New York: Oxford University Press, 2009). Alan B. Krueger, ed., Measuring the Subjective Well-Being of Nations: National Account of Time Use and Well-Being (Chicago: University of Chicago Press, 2009). Joseph E. Stiglitz, Amartya Sen, and Jean-Paul Fitoussi, Report of the Commission on the Measurement of Economic Performance and Social Progress. Paul Dolan, Richard Layard, and Robert Metcalfe, Measuring Subjective Well-being for Public Policy: Recommendations on Measures (London: Office for National Statistics, 2011).
Irrational is a strong word: The view of the mind that Dan Ariely has presented in Predictably Irrational: The Hidden Forces That Shape Our Decisions (New York: Harper, 2008) is not much different from mine, but we differ in our use of the term.
accept future addiction: Gary S.